Human capital management
Employees are the mainstay of an organization. Organizations run smoothly due to individuals who help them succeed and increase their productivity. They possess certain personal traits like creativity, talents, abilities, intelligence, judgment and wisdom. They also acquire knowledge, training, skills and experience. All these resources cumulatively are used by employees in their work that produces economic value. Collectively, these resources are defined as human capital. It can be grouped into three categories: 1) Intellectual capital; 2) Social capital; and 3) Emotional capital. Human capital is unique and differs from any other capital. It is needed for companies to achieve goals, develop and remain innovative. Human capital plays a significant role in improving the productivity and output of a company. At a broader level, human capital management refers to three important capacities:
- The capacity to develop talent
- The capacity to deploy talent
- The capacity to attract talent from elsewhere
These three capacities together are responsible for a company’s human capital competitiveness. Evidence suggests that companies that invest in improving their human capital, leave their counterparts that lack human capital, way behind (Crook, Todd, Combs et al, 2011).
Increasing human capital is not an end unto itself. Companies require efficient human capital management. Human capital management in real sense is managing the employees or the workforce. Wise human capital management must ensure that the employees are treated well and they have avenues for timely growth and development in the company as they are an important resource and play a vital role in the success of an organization. Importance of human capital management plan for HR managers cannot be overstated in almost all the areas of their operation:
- Training: Employees need to be properly inducted and trained. Training has to be on an ongoing basis for continuous upgrade of employees’ skills.
- Performance monitoring: Managers need to regularly monitor subordinates by robust reporting systems. Employees’ comments and feedback are also equally important.
- Communication: Employees should feel encouraged to discuss problems openly and to give suggestions. This is a great way to make employees have a sense of belonging to the company.
- Clear job responsibilities: In order to give their best, employees need clear cut responsibilities that are in line with their qualifications, training and experience.
- Motivation: It works like magic. Recognition of their talent and work makes employees work harder. Employees need to be rewarded from time to time for the good work they do.
Strategic human capital management
For any human capital management to be effective, companies need to strategize well. Companies need to align human capital strategies with their overall objectives and mission. This is possible only through extensive planning, analysis and implementation of their human capital plans. Strategic HC planning helps companies to devise policies and strategies to bring about a quantum jump in the efficiencies of the employees. Implementation of strategic HC plan equips the HR to hire the most well-suited candidates, rightly train them, provide coaching and mentoring, upgrade their skills, provide career development plans, motivate and eventually retain them. A strategic human capital plan would need great clarity in visualizing direction, goals and objectives.
Key components of a strategic human capital plan would be:
- Clarity in direction: A complete understanding of the organizational needs, budget, expectations of all stakeholders including the current workforce is essential for formulating strategic direction. This would need detailed discussions, data collection and analysis of the current state workforce and where it must go in the coming years.
- Clarity in human capital goals: Analysis of the current state and understanding of where the company wants to go throws up gaps between current and desired state. These gaps show the way to develop human capital goals. Some examples of human capital goals so identified would be a) Only the best talent would be sourced; b) Designing effective and realistic induction programs; c) Consistent and high-quality training for upgrade of skills of the workforce; and d) Devising ways for retaining talented workers.
- Strategies or policies to accomplish already defined goals and objectives: Once goals and objectives are set, strategies and policies to achieve the same need to be designed. Care must be taken by HR managers to devise long term plans to ensure employee satisfaction with a view to retaining them. Team managers should especially allow delegation of responsibilities to employees. A robust system of feedback, interaction and tracking employee growth are all part of a good strategic human capital plan.
- Implementation plan: Even a great strategic plan would fail to deliver if the implementation of it is not proper. Successful implementation requires proper allocation of a responsible person as well as a defined budget. The implementation also needs to be done in a strict time bound manner.
- Accountability system: To assess whether a plan has been successfully implemented or not there has to be an accountability system which also helps to spot failures in the plan if any
Benefits of human capital management
A strategic human capital management plan is a necessity for modern workplaces. It is not optional at all. Some of the benefits of such a plan, at the risk of repetition, are as follows:
- Human capital management enables human resource professionals to hire the right candidate for the right role.
- Human capital management ensures extracting the best out of employees.
- Human capital management makes clear communication and easy access to information possible between superiors and subordinates leading to quick problem-solving.
- Training and skill development activities are essential for upgrading the existing knowledge of employees. Human capital management makes an employee self-sufficient and confident to tackle his work leading to better productivity.
- Human capital management realizes the importance of soft skills and personality development for employees and makes sure that the employees are trained in these.
- Human capital management helps the employees to improve in areas where they feel they are lacking. It not only benefits the employees but also the entire organization.
The key to business sustainability in a robust market competitiveness is smart investment in human capital plan. This ensures hiring the right candidate, thus translating to stellar firm-level performance and business profitability.